(Calculating Project cash flows and NPV) You are considering expanding your product line that currently consists of Skateboards to include gas-powered skateboards, you feel you can sell 8,000 of these per year for 10 years (after which time this project is expected to shut down with solar powered skateboards taking over) The gas skateboards would sell for $120 each with a viarable cost of $35 for each one produced, and annual fixed cost associated with production would be $200,000. In addition there would be a $1,400,000 initial expenditure associated with the purchase of new production eqiupment. It is assumed tha this initial expenditure will be depreciated using the simplified straight line method down to zero over 10 years. This project will also require a one time initial investment of 60,000 in net working capital associated with inventory and this working capital investment will be recovered when the project is shut down. Finally assume that the firm marginal tax rate is 37%.

a. What is the initial cash outlay associated with this project?

b. What are the annual net cash flows associated with this project for years 1 through 9?

c What s the terminal cash flow in year 10 plus any additional cash flows associated with the termination of the project?

d. What is the pojects NPV given a required rate of return of 8%